Correlation Between Nexgel and NexGel Warrant

Can any of the company-specific risk be diversified away by investing in both Nexgel and NexGel Warrant at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nexgel and NexGel Warrant into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nexgel Inc and NexGel Warrant, you can compare the effects of market volatilities on Nexgel and NexGel Warrant and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nexgel with a short position of NexGel Warrant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexgel and NexGel Warrant.

Diversification Opportunities for Nexgel and NexGel Warrant

0.85

Correlation Coefficient

Nexgel  NexGel Warrant

Very poor diversification

The 3 months correlation between Nexgel and NexGel is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nexgel Inc and NexGel Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGel Warrant and Nexgel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nexgel Inc are associated (or correlated) with NexGel Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGel Warrant has no effect on the direction of Nexgel i.e., Nexgel and NexGel Warrant go up and down completely randomly.

Pair Corralation between Nexgel and NexGel Warrant

Given the investment horizon of 90 days Nexgel is expected to generate 1.6 times less return on investment than NexGel Warrant. But when comparing it to its historical volatility, Nexgel Inc is 2.16 times less risky than NexGel Warrant. It trades about 0.25 of its potential returns per unit of risk. NexGel Warrant is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  48.00  in NexGel Warrant on October 1, 2024 and sell it today you would earn a total of  41.00  from holding NexGel Warrant or generate 85.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Nexgel Inc  vs.  NexGel Warrant

Nexgel Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nexgel Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent technical and fundamental indicators, Nexgel disclosed solid returns over the last few months and may actually be approaching a breakup point.

NexGel Warrant

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NexGel Warrant are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, NexGel Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexgel and NexGel Warrant

The main advantage of trading using opposite Nexgel and NexGel Warrant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexgel position performs unexpectedly, NexGel Warrant can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NexGel Warrant will offset losses from the drop in NexGel Warrant's long position.

The idea behind Nexgel Inc and NexGel Warrant pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.